THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR
ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, OFFERED FOR SALE, DISTRIBUTED,
ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE, OR FOREIGN
SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION.

     

    CONVERTIBLE
PROMISSORY NOTE

     

    
      	
              $350,000.00

            	
              November
      24, 2009

            
	 
      	
              Rochester,
      New York

            


    

     

    FOR VALUE
RECEIVED, SECUPRINT INC. (“Secuprint,”, the “Borrower”),.promises to pay to
Congregation Noam Elimelech  (the “Lender”), or to its order, the
principal sum of $350,000 (the “Principal Amount”), of which can be paid by the
Optional Conversion of such amount into up to 218,750 shares of common stock,
together with interest in arrears on the unpaid principal balance from time to
time outstanding from the date hereof until the entire principal amount due
hereunder is paid in full at the rate(s) provided below.

     

    1.           Maturity. The
aggregate Outstanding Principal Amount, together with all accrued interest
thereon and expenses incurred by the Lender in connection herewith
(cumulatively, the “Outstanding Amount”), shall be due and payable in full on
the earliest to occur of (the earliest of such events, the “Maturity Date”): (i)
November 24, 2012 (the “Scheduled Maturity Date”) and (ii) the acceleration of
this Note upon the occurrence of an Event of Default.

     

    2.           Interest. Interest
shall accrue on the then outstanding principal balance of this Note at a fixed
interest rate per annum equal to 10%. Accrued interest shall be payable in cash
in arrears on the last day of each calendar quarter commencing on December 31,
2009, until the outstanding principal balance is paid in full. If at any time
the principal balance of this Note shall be paid in full, then all accrued
interest shall be payable at the time of such principal payment.

    


    3. Conversion.

     

    3.1.
Optional
Conversion. At anytime during the term of the Note,  the
outstanding principal balance of this Note may,  at the sole option of
the Lender, be converted, in whole or in part, into fully paid and
non-assessable shares of Document Security Systems, Inc.’s common stock, par
value $0.02 per share (the “Common Stock”), at a conversion price equal to $1.60
per share (the “Conversion Price”), subject to adjustment as set forth
herein.  Conversions can only be made in minimum increments of
$25,000.

     

    3.2.
Mechanics of
Conversion. The Lender shall notify the Borrower of its election to
convert all or part of this Note in accordance with Section 2.1. The
Borrower shall, as soon as practicable but in no event later than seven days
following its receipt of such notice, issue and deliver to Lender a certificate
or certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fractional share in
accordance with Section 2.3. This Note shall be deemed to have been
converted and a certificate or certificates for shares of Common Stock shall be
deemed to have been issued, and the Lender or any other person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes as of the date said notice is received by the Borrower.
If this Note shall have been converted in part, the Borrower shall, at the time
of delivery of said certificate or certificates, deliver to the Holder a new
Note evidencing the remaining outstanding principal balance of this Note, which
new Note shall in all other respects be identical with this Note. Upon
conversion of this Note in full, this Note shall no longer be deemed to be
outstanding and all rights with respect to this Note shall immediately cease and
terminate on such conversion date, except only the right of the Holder to
receive the shares of Common Stock to which it is entitled as a result of the
conversion.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    3.3.
Fractional
Shares. No fractional shares of Common Stock shall be issued upon
conversion of this Note. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Borrower shall pay cash equal to such fraction
multiplied by the Conversion Price.

     

    3.4.
Subdivision or
Combination of Common Stock. If Document Security Systems at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced, and if Document Security Systems at any time combines
(by reverse stock split, recapitalization or otherwise) its outstanding shares
of Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination will be proportionately
increased.

     

    3.5.
Merger, Consolidation
or Sale of Assets. If there shall be a merger or consolidation of
Document Security Systems with or into another corporation (other than a merger
or reorganization involving only a change in the state of incorporation of
Document Security Systems), or the sale of all or substantially all of Document
Security Systems’s capital stock or assets to any other person, then as a part
of such transaction, provision shall be made so that the Lender hereof shall
thereafter be entitled to receive the number of shares of stock or other
securities or property of Document Security Systems or of the successor
corporation resulting from the merger, consolidation or sale, to which the
Lender would have been entitled if the Lender had converted this Note
immediately prior thereto.

    


    3.6.
Notice of Adjustment
to Conversion Price. Upon any adjustment or other change relating to the
Conversion Price or the securities issuable upon the conversion of this Note,
then, and in each such case, the Borrower shall give written notice thereof,
which notice shall state the Conversion Price resulting from such adjustment and
the increase or decrease in the number or other denominations of securities
issuable at such price upon the conversion of this Note setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.

     

    3.7.
Reservation of
Shares. Document Security Systems covenants that it will at all times
until this Note is paid or converted in full under the terms hereof reserve and
keep available out of its authorized and unissued Common Stock, solely for the
purpose of issue upon conversion of this Note, such number of shares of Common
Stock as shall then be issuable upon the conversion of this Note.

     

    3.8.
Notice to Allow
Conversion. If (A) Document Security Systems shall declare a
dividend (or any other distribution in whatever form) on the Common Stock,
(B) Document Security Systems shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C) Document Security
Systems shall authorize the granting to all holders of the Common Stock of
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights, (D) the approval of any stockholders of
Document Security Systems shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
Document Security Systems is a party, any sale or transfer of all or
substantially all of the assets of Document Security Systems, of any compulsory
share exchange whereby the Common Stock is converted into other securities, cash
or property or (E) Document Security Systems shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of Document
Security Systems, then, in each case, Document Security Systems shall deliver to
the Holder, at least twenty (20) calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange. The Holder is entitled
to convert this Note during the 20-day period commencing on the date of such
notice through the effective date of the event triggering such
notice.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    4. Optional Borrower
Redemption. At any time on or before November 24, 2012, the Borrower
shall have the right to redeem all of the then outstanding principal of this
Note for a price equal to the outstanding principal amount plus all accrued and
unpaid interest.   Lender has 72 hours upon notification to elect
to convert the shares.

    


    5.           Usury.  All
agreements between the Borrower and the Lender are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of acceleration of
maturity of the indebtedness evidenced hereby or otherwise, shall the amount
paid or agreed to be paid to the Lender for the use, forbearance, or detention
of the indebtedness evidenced hereby exceed the maximum permissible amount under
applicable law. If, from any circumstance whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due shall
involve transcending the limit of validity prescribed by law, the obligation to
be fulfilled shall automatically be reduced to the limit of such validity, and
if from any circumstances the Lender should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest, and, if the principal amount of this
Note has been paid in full, shall be refunded to the Borrower.

     

    6.           Late
Charge.  If an interest payment is not received within ten days
of its due date, Borrower shall pay a late charge equal to twenty-five percent
(25%) of the delinquent amount; any excess collected by mistake shall be
refunded on request, and each such late charge shall be separately charged and
collected by the Lender.  Payments may be applied in any order in the
sole discretion of the Lender but prior to demand, shall be applied first to
past due interest, expenses and late charges, then to scheduled principal
payments, if any, which are past due, then to current interest, expenses and
late charges, and last to remaining principal.

    


    7.           Collateral. Upon the
use of proceeds from this Note and the proceeds from the Promissory Note between
Secuprint, Inc and Mayer Laufer, dated November 24, 2009, for the payment in
full of the Secured Promissory Note between Baum Capital  Investments
and Secuprint dated December 18, 2008, this Note along with the Promissory Note,
each with equal rights pari pasu, is secured by all of the assets of
Secuprint, subject to certain default provisions of equipment leases held by
Secuprint with Baum Capital Investments, which provide Baum Capital Investments
with the right of recovery for rents due under the equipment leases in excess of
equipment value in the event of default.


     

    8.           Replacement of Note.
If this Note is mutilated, lost, stolen or destroyed, the Borrower shall issue
or cause to be issued in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Note, a new Note, but only upon
receipt of evidence reasonably satisfactory to the Borrower of such loss, theft
or destruction and customary and reasonable bond or indemnity, if
requested.

    


    9.           Events of
Default.  The following constitute an event of default (“Event
of Default”):

    


    a.           Borrower
fails to pay any of its material liabilities, obligations, and indebtedness to
Lender of any and every kind and nature, whether heretofore, now or hereafter
owing, arising, due or payable and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent, fixed or
otherwise whether arising under or in accordance with the Transaction Documents
or otherwise when due and said failure continues for a period of ten (10)
days;

    


    d.           Borrower
fails or neglects to perform, keep or observe any of the covenants, conditions
or agreements contained in this Note;

    


    e.           Any
warranty or representation now or hereafter made by the Borrower in connection
with this Note is untrue or incorrect in any material respect, or any schedule,
certificate, statement, report, financial data, notice, or writing furnished at
any time by the Borrower to the Lender is untrue or incorrect in any material
respect, on the date as of which the facts set forth therein are stated or
certified;


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    f.           A
proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed against
Borrower which is not dismissed within sixty (60) days of its filing, or a
proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed by
Borrower or the Borrower makes an assignment for the benefit of creditors or
Borrower takes any corporate action to authorize any of the
foregoing;

    


    g.           Borrower
voluntarily or involuntarily dissolves or is dissolved, terminates or is
terminated;

    


    h.           Borrower
becomes insolvent or fails generally to pay its debts as they become due, and
said failure continues for a period of thirty (30) days after written notice of
same from the Lender to the Borrower;


    


    10.           Purpose.  The
Loan proceeds shall be used for the business purpose of payment in full of
Secuprint’s Secured Promissory Note with Baum Capital Investments dated December
18, 2008

     

    11.           Miscellaneous.

    


    a.           Authority and
Enforceability; Etc. The Borrower hereby represents and warrants to the
Lender that:

    


    i.           it
has full power and authority and has taken or shall take all required corporate
and other action necessary to permit it to execute, deliver, and perform all of
its obligations contained in this Note, the Security Agreement, and any other
documents or instruments delivered in connection herewith, and to borrow
hereunder, and such actions to the best of its knowledge will not violate any
provision of law applicable to, or the organizational documents of, the
Borrower, or result in the breach of or constitute a default under any material
agreement or instrument to which the Borrower is a party or by which it is
bound, which default has not been waived in writing on or prior to the date
hereof;

    


    ii.           this
Note has been duly authorized and validly executed by and is the valid and
binding obligation of the Borrower enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other laws affecting creditors’ rights and remedies
generally, and by general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law);

    


    iii.           neither
the execution and delivery by the Borrower of this Note, nor the performance by
the Borrower of its obligations hereunder, requires the consent, approval or
authorization of any person or governmental authority, which consent, approval,
or authorization has not been obtained; and

     

    b.           Notices. All notices
to any party required or permitted hereunder shall be in writing and shall be
sent to the address or facsimile number set forth for such party as
follows:

    


    i.            If
to the Lender:

    


    Congregation
Noam Elimelech

    Mayer
Laufer, President

    5907
14th
Avenue

    Brooklyn,
NY 11219


     

    ii.           If
to Document Security Systems, Inc.:


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    Document
Security Systems, Inc.

    28 East
Main Street, Suite 1525

    Rochester,
NY 14614

    Attention: Chief Financial
Officer 

     

    ii          If
to Secuprint:

    


    Secuprint
Inc.

    c/o
Document Security Systems, Inc.

    28 East
Main Street, Suite 1525

    Rochester,
NY 14614

    Attention: Vice President of
Finance 

    


    Any such
notice shall be deemed effectively given (i) upon personal delivery to the party
to be notified; (ii) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day; (iii)
three days after having been sent by registered or certified mail, return
receipt requested, postage prepaid; or (iv) one day after deposit with a
recognized national overnight courier, specifying next day delivery, or two days
after deposit with a recognized international overnight courier, specifying two
day delivery, in each case with written verification of
receipt.


     

    c.           Waiver. No failure to
exercise, and no delay in exercising, on the part of the Lender, any right,
power, or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.

     

    d.           Amendments. Any term,
covenant, or condition of this Note may be amended or waived only by written
consent of the Borrower and the Lender.

     

    e.           Expenses. Any
reasonable expense incurred by the Lender (including, without limitation,
reasonable attorneys’ fees and disbursements) in connection with the
administration, or enforcement of this Note and any other document executed by
the Borrower in connection with the obligations of Borrower hereunder or any
amendment hereto or thereto, or the exercise of any right or remedy upon the
occurrence of an Event of Default, including, without limitation, the recording
and filing fees to perfect the liens granted under the Security Agreement and
the costs of collection and reasonable attorneys’ fees and expenses, shall be
paid by the Borrower within 15 days of receiving written notice thereof from the
Lender. Any such expense incurred by the Lender and not timely paid by the
Borrower shall be added to the other obligations hereunder and shall earn
interest at the same rate per annum as the principal hereunder.

     

    f.           Governing Law. This
Note shall be governed by and construed in accordance with the laws of the State
of New York without giving effect to any conflict or choice of laws
principles.

     

    g.           Transfer; Successors and
Assigns. The terms and conditions of this Note shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
This Note shall not be assignable by any Lender without the prior written
consent of the Borrower, provided that the Lender may assign or transfer any of
its rights, privileges, or obligations set forth in, arising under, or created
by this Agreement to any entity controlled by, controlling or under common
control with the Lender. The Borrower may not assign this Note without prior
written consent of the Lender, provided that the Borrower may assign this Note
to any successor of all or substantially all of its assets or business, or any
entity surviving the merger, combination or consolidation with the
Borrower.

     

    h.           Entire Agreement.
This Note and any other agreement or instrument entered into in connection
herewith contains the entire agreement of the Borrower and the Lender with
respect to the subject matter hereof.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    i.           Confidentiality. In
addition to separate confidentiality agreement, if any, the Lender will at all
times keep confidential and not divulge, use or make accessible to anyone the
terms and conditions of this Agreement and the transactions described herein,
and any non-public material information concerning or relating to the business
or financial affairs of the Borrower to which such party has been or will become
privy relating to this Agreement, except to its employees and advisors in such
capacity, as required to perform its obligations hereunder, if required by law
or rules of a stock exchange on which its or its parent’s securities are listed,
or with the prior written consent of the Borrower.

    


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    IN
WITNESS WHEREOF, the Borrower has caused this Note to be executed by its duly
authorized representative as of the day and year first above
written.

      

    
      
        
          
            
              
                	
                        SECUPRINT
      INC.

                      
	
                         
       

                      	
                         
       

                      
	
                        By:  

                      	 
      
	 
      	
                        Name:
      Patrick White

                        Title:
      Chief Executive
Officer

                      


              

            

          

        

      

    

    


    
      
        
          
            
              	
                      DOCUMENT
      SECURITY SYSTEMS, INC.

                    
	
                       
       

                    	
                       
       

                    
	
                      By:  

                    	 
      
	 
      	
                      Name:
      Patrick White

                      Title:
      Chief Executive
Officer

                    


            

          

        

      

    

    


    
      
        
          
            	
                    CONGREGATION
      NOAM ELIMELECH

                  
	
                     
       

                  	
                     
       

                  
	
                    By:  

                  	 
      
	 
      	
                    Name:
      Mayer Laufer

                    Title:
      President